I agree with
@Josh Mitchell and
@Dan Mackin for sure, you would definitely want to be cautious. When Dan is asking about how important the friendship is to you, what that really means in my opinion is, is they don't pay can you see yourself evicting/foreclosing on them? My perspective is, if they don't pay their obligation to you then they are telling you how important the friendship is to them and you could evict them. If I went to help a friend out like this, that is how I would view it and the expectations would be set UP FRONT, before we even got into the deal.
That being said, people do owner financing every day, so if you found a deal you might be able to act as a wholesaler and collect a fee to work the deal.
If you were to buy it and finance yourself you wouldn't be able to easily sell it to them by you financing them yourself because of the "due on sale claus." How ever if you bought it cash you could do that. Yes, there is a reason a bank won't finance them so what make you think they could pay you? There is all sorts of reasons people can't get financed I imagine, find out their situation. If you did this they would put a down payment on the house, you would have a secured asset, so even if you had to foreclose you still have the asset.
Keeping in mind you would ALWAYS want to have a clear exit strategy or two or three or four! :) You would want to make sure the house was enough of a discount to rent, re-sell on market, or move into yourself. I am sure you can come up with more but those are off the top of my head.
One thing I did not mention because I haven't learned much about it is, a lease option. I imagine that would fit the criteria where you could finance with your credit, lease it to them with the option to buy at a later date. This would not mean the house is sold until that date so the "due on sale claus" would not kick in. This would give them time to secure financing or work something else out. "Subject to" is a possibility but from what I have heard it is a nightmare.
More important than anything about this post is that you are thinking creatively! I think that is one of the best exercise for newbie investors! I am very new as well, so I would say verify that strategy you chose with legal counsel. A good start to see if it is possible is finding a great deal! There is a webinar on Thursday about 10 ways to find a great deal, I would recommend you check that out.
Best of luck!
